Chinese telecommunications vendor ZTE has announced that it has reached a deal with the US Commerce Department over the trade sanctions that threatened to put the powerful conglomerate out of business.
ZTE has vowed to clean up its act in light of the decision by the US after weeks of protracted talks between officials in Beijing and Washington. In April, the US Commerce Department prohibited the sale of crucial US components to ZTE for a period of seven years. It had found that the Chinese telecommunications colossus had failed to take the appropriate actions against its staff in relation to the trade violation it engaged in with Iran and North Korea.
ZTE chairman Yin Yimin said the company had to start holding the relevant people to account for the trade violations in 2016, and said the ban imposed in April highlighted the issues within its internal management systems.
In a statement released to Bloomberg, the chairman said, “We must deeply realize that this issue in essence mirrored problems in our compliance culture and management. We should hold relevant people accountable and avoid similar issues in the future."
It has been disclosed that part of the deal agreed between the US and ZTE will see the Chinese vendor pay a $1bn penalty, with another $400m in escrow to cover possible future violations. In addition to this, ZTE will also be forced to overhaul its entire board of directors and must hire outside legal compliance specialists who will in turn report directly to the Commerce Department for 10 years.
Once ZTE has executed these changes Washington will strike the company from a sanctions list. China's foreign ministry on Friday offered a muted response to the ZTE deal, but a spokeswoman added the following statement, "We also hope the US can provide a fair, equal and friendly atmosphere for Chinese enterprises' investments and operations there.”